Reference no: EM133082958

Answer these questions on the Ricardian model:

a. Briefly discuss the implications of a country operating inside its production-possibility curve. Use a graph in your discussion.

b. Briefly discuss the primary features of the mercantilist philosophy. Mention two major criticisms of the mercantilist theory as put forward by Adam Smith and other economists.

c .Explain how a mutually beneficial trade is possible in a two-country, two-commodity model even when one of the countries has absolute advantage in the production of both the commodities.

d. Suppose labor productivity in France is such that one hour of labor is required to produce one gallon of wine while two hours of labor are required to produce one pound of cheese. Assuming the availability of one million labor hours, draw a constant-cost production-possibility curve for France with the quantity of cheese measured along the vertical axis and the quantity of wine on the horizontal axis. If the free-trade price of wine is two pounds of cheese per gallon, show where, with free trade, France will produce on its production-possibilities curve. Then, draw and use a trade line to illustrate how France can gain from free trade.

e. Explain how products produced by high-wage workers in the United States can compete with the products manufactured in countries whose workers earn much lower wage